Cattle futures shoot to record highs

U.S. cattle futures rallied to new all-time highs Tuesday, following a surge in wholesale beef prices.

February live-cattle picked up 1.05 cents to $1.3765 a pound at the Chicago Mercantile Exchange, which surpassed the record high of $1.3682 established for the front-month contract last week. April live-cattle advanced 0.72 cent, or 0.5%, to $1.3780 a pound.

The cattle market has been underpinned by a historically tight supply of slaughter-ready animals and new records for wholesale beef prices. If retailers are willing to pay more for beef, processors have greater incentive to bid aggressively for cattle in the cash markets.

Wholesale choice-grade beef prices on Monday climbed $1.96 per hundred pounds to $216.94, according to the USDA, breaking the new records set Friday and Thursday. The previous record of $211.37 per hundred pounds was established May 23. Select-grade prices climbed $3.18 per hundred pounds to $214.76, also an all-time high. At midday, prices rose even further.

Some analysts remain uncertain how long retailers can continue to buy beef at these levels if they're unable to pass costs onto budget-conscious consumers.

"Demand is certainly going to be tested this week as the market deals with sharply higher beef pricing," said Troy Vetterkind, head of Vetterkind Cattle Brokerage in Thorp, Wis. in a research note Tuesday. "This will determine how much higher beef prices can go in the coming weeks."

Feeder-cattle futures also rose. Feeder-cattle for January added 0.77 cent, or 0.5%, at $1.6860 a pound.

Hog futures were supported by buying across the livestock sector.

Often as beef and cattle prices rise, retailers increase their purchases of pork and chicken, which are typically cheaper proteins. The expectation for increased demand for pork in the week ahead further fueled buying.

February hogs picked up 0.62 cent, or 0.7%, to 86.00 cents a pound. April hogs rose 0.3 cent to 90.67 cents a pound.